Politicians from the German state of Hesse say LSE bosses are insisting on London as the legal base for the merged LSE-Deutsche Boerse exchange due to concerns about the post-Brexit future.
The proposed £21bn mega-merger is pending approval by the European Commission, and Hesse, the German state which includes the city of Frankfurt, home to Deutsche Boerse. Now Hesse’s politicians say the deal will expose Frankfurt to uncertainty during the Brexit negotiation process.
Thomas Schäfer, finance minister in Hesse, told the Sunday Times that “national loyalty” was the primary motive for keeping the headquarters in London, rather than exclusively financial concerns.
Read more: Exchanges bullish over mega-deal's prospects
Schäfer argued that Britain’s exit from the EU meant the enlarged entity would be better off within Germany. “My feeling is the management of the LSE has realised this, but is shying away from relocating the registered office for political reasons,” he told the Times.
Last week, Carsten Kengeter, CEO at Deutsche Boerse, played down the significance of London being the legal base for the new group, telling German media: “There are to be two headquarters.”
Kengeter also tried to win further German support for the proposed merger by stressing future job opportunities.
“In addition to the jobs we have already created in 2016, we are planning – as part of our growth strategy – to increase our number of employees by another 400 during the course of the year. More than 300 of them will be working in Frankfurt,” he said.
LSE shareholders would secure 45.6 per cent of the new business, with Deutsche Boerse shareholders retaining the remaining shares.
Officials at both exchanges have expressed confidence in the merger gaining approval from competition regulators in Brussels but sources close to the deal have told City A.M. that they may need to offer further concessions to Hesse in order to win approval.
While a ruling on the deal is expected from the European Commission on 3rd April, Hesse’s Ministry of Economic Affairs has the power of veto over the mega-merger.